Thursday, September 29, 2005

In Part 1, we broached the subject of rate increases. And in Part 2, we looked at the questions we need to ask about why they went up.

Now let’s talk about what we can do about it.

Well, the first, obvious move is to contact your agent to see what other carriers are available in your area, and how they stack up – both in financial status and rates – to your current carrier. Of course, ones current health status (as well as those of covered family members) will play a role in this process. And remember, just because the new carrier’s rates are better this year, don’t forget that they’re subject to the same issues as your current insurer. That is, their rates are going to go up next year, too. Doesn’t mean that you shouldn’t make the switch, but you need to know that it’s a temporary fix.

Another item to discuss is what, if any, different deductible and/or co-insurance levels will do to help mitigate the rate increase. This is especially relevant when discussing an HSA, because if one has a decent “cushion” built up in the actual account, one can afford to raise the deductible and/or the co-insurance percentage.

There’s one more piece that’s been bugging me: in his email, my friend lamented that he couldn’t afford to raise his prices 30% to match the increase in his health costs. While I obviously sympathize with him, the comparison really isn’t useful. There are pieces to the healthcare puzzle that we, as consumers, have handed over to our insurers, and they have an obligation to pay certain costs. When those costs rise – and they do: med’s especially, but all the high tech stuff isn’t cheap, either – the insurer has an obligation to both it’s stakeholders (owners) and its insureds to have enough money on hand to meet those increasing costs.

Here’s an imperfect, but hopefully useful, analogy: no one likes the price of gas, and it’s especially frustrating when it’s $2.59 on the way in to work, and $2.89 on the trek back home. The only thing that seems to have changed in the intervening hours is that a hurricane is now threatening refineries. But the gas “in the ground” at the station still cost what it cost last week when it was delivered. So why does the price go up? It went up because of the anticipated future cost to replenish the tanks. In the same way, insurers have to guess at the future cost of the services for which they’re going to have to pay.

This is the part of the post where I stand up to receive the slings and arrows of those who will call me a shill for the industry. So be it. But the fact that some carriers raise their rates by some obscene (by our standards) amount doesn’t diminish the fact that the costs of delivering medical services continues to rise, and we want someone else to pay the lion’s share of those costs.

Tuesday, September 27, 2005

Insurance underwriting refers to the practice of obtaining and then evaluating information about the current health of the prospective insured. Of course this starts with the information on the application, but it may also include doctors’ records, or even a physical exam. All of this gives the underwriter a decent “snapshot” of the applicant's current health.

But as the insured ages, so does that underwriting information. In the case of an individual, claims are paid, health conditions arise or worsen, new medications are prescribed. In the case of a group, in addition to those health factors, the make-up of the group also changes over time. The result of all of these changes is that the initial information, on which the rates were based, become obsolete (i.e. “stale”), and this because the risk has changed, the premium will also.

Now, take that same principle, and apply it to a block of business (in other words, a large group of policies). As the group ages, and as claims are paid, and as the overall health of the group declines, rates increase. At first, this isn’t necessarily a terrible thing; after all, we’ve come to expect some increases along the way. But as year after year brings increase after increase, people “trade in” their old, expensive policies for a newer one, with cheaper rates (remember, the new policy will benefit from new underwriting, and will generally be less expensive).

That is, the healthy individuals (or groups, as the case may be) will find other coverage. But if your health has really declined, then you may have no choice but to stay put. And you’re not the only one in that boat: maybe that block of business has a LOT of unhealthy folks in it. So the claims mount up, and fewer and fewer insureds are left in the original “pool” of those who signed up. Welcome to the vicious cycle we call the Death Spiral.

As my colleague Bob Vineyard notes in the comments section of that post, there’s another factor, as well: age (band) changes. Just getting older affects our premiums. Some companies rate people based on their actual age each year, while other lump folks together in age bands. There’s really no “better” or “right” way, each has its own pro’s and con’s. If you’re rated by “attained age,” then your rate only goes up a relatively small amount, but it does this every year. If your carrier bands people, then your rate doesn’t change because you turned 42. But you’ll be hammered when you hit 45. Your choice.

Okay, so we’ve asked and answered the right questions. Now, what to do about that rate increase. Stay tuned for the exciting conclusion in Part 3.

Sometimes - and I know that this will come as a complete surprise – I tick people off. Not necessarily on purpose, mind you, but by happenstance, or providence, or just plain luck. Today’s episode may be instructive:

Sally and I had been playing phone tag all week; we finally connected early this afternoon. Sally was interested in medical insurance for her husband, and she reminded me that we had discussed this last year. At the time, he had been cancer free for 4 years or so, and I had told Sally that carriers really preferred at least 5 years treatment and cancer free.

So, Sally informed me that it had now been five years, and asked what kind of plans and rates would be available. I suggested that, before we went through a lot of paperwork, perhaps she could tell me a little more about Rob’s current health.

“Oh, he still smokes, but he only takes one medicine, it’s [name of post-chemo med],” she informed me. I knew from experience that this particular med would render him uninsurable in the “standard” markets, and told her so.

“Oh, well, then, he’ll just stop taking it and we’ll say no on the application.” As one might imagine, I was less than sanguine about this suggestion, and I told her so.

“Well, we have ALL of our insurance through your agency; surely you can do SOMETHING.” You’ll be pleased to know that I didn't ask her to stop calling me Shirley, but I was still unable to help her. She continued, “otherwise, we’ll move all of our policies to another agency.”

This particular threat has never really moved me; if a client doesn’t understand that I really don’t make the rules, then there’s precious little that I can do to convince them to listen. So I expressed my regrets, and started to suggest another course of action.

But Sally was having none of that, and hurriedly closed the conversation, informing me that she would be calling back later to cancel her other policies.

Now, I thought about this for a while: someone had just threatened to fire me as her agent because I was doing my job in an ethical and reasonable manner. Isn’t that just the least bit odd? So I called a friend of mine, who agreed with my course of action, and asked if there was anything I could have done for Sally’s husband.

“That’s the funny part of this,” I said, ”I was trying to tell her that we have a high risk plan that may do the job, but she hung up on me before I could get all the words out.” My friend asked what I planned to do, and suggested that I shouldn’t punish Sally’s husband, who needed the coverage, for Sally’s unreasonable behavior.

He had a point.

So, about an hour later, I called Sally back, and explained that I did have access to a plan that might work for her husband, and that I had been trying to tell her that when she hung up on me. She apologized, and the upshot is that she asked me to start the paperwork on the new plan, and also to see what we could do for herself and her child.

Friday, September 23, 2005

It should be apparent by now that I am hardly any insurance company's shill. But when one does something right, it's appropriate to acknowledge that.

Today, I received this email from United Healthcare:

"To help affected UnitedHealthcare members receive the care they need without unnecessary delays or disruptions, we are temporarily changing our claims payment policy for affected members. Payment of the health care services provided, regardless of location or network status, will be reimbursed at UnitedHealthcare's in-network benefit level."

This means that victims of Katrina don't have to sweat whether or not the providers they see are in-network. It also means there's one less hassle. One could argue that this is hardly altruistic: for one thing, it's good PR. For another, it's probably less of a headache from UHC's end, as well.

But I believe that why one does something is less important than that the right thing is done.

Kudos to UHC.

UPDATE: Just received another email from United: "With Hurricane Rita heading towards land, we are committed to supporting our customers and members during this time. We are focused on helping people receive the care they need. The measures that were put in place for Hurricane Katrina are at the ready for those impacted by Hurricane Rita"

Among other things, they've eased the process for folks to "buy ahead" on their meds, so that they don't run short during the crisis. I'm going to second Chad's remarks in the comments: double Kudo's to UHC.

Recently, I received an email from a good friend (who is NOT a client) lamenting the latest increase in his family’s health coverage. I happen to know that said coverage is through a well-known and well-established carrier, and is in fact an HSA plan. He wrote “(m)y Health Insurance premium just went up $400!” Now, there was no indication as to whether that was $400 a month, or a year, nor did he mention what percentage of his premium that $400 represented.

And really, that’s the important number: absent some yardstick, there’s no real way on knowing just how grievous that rate increase is. Look at it this way: if his annual premium before the rate increase was $3500, then a $400 dollar increase is about 12%, which isn’t really all that hateful. But I really don’t know, because that information is missing. The reason I mention this is that I often get calls from folks who give me raw numbers, but with no context, so I have no way of knowing whether or not I can help them.

The email went on to report that when he called the carrier to question the increase, he was told “TO BE THANKFUL that it was only a $400 raise - that most parts of the country went up 30%.” Now, the company rep shouldn’t have been so blasé about something so important, and it really doesn’t matter what rate increases other folks got.

The email concluded by asking “(w)hen will WalMart buy some hospitals and offer their own health care?” That’s really two questions, each easily answered: 1) never and 2) they already do.

All of which is background to the real point of this post [ed: ‘bout time you got around to that!] which is my reply to him: “You’re asking the wrong questions.”

So, what are the “right” questions?

Let’s start with the premise that my friend is hardly an exclusive case: lots of folks have health had their health plans for a long time, and have become frustrated at the ever-increasing rates. There are two primary reasons that one sees substantial rate increases on older business: one is “stale underwriting,” and the other is the legendary “death spiral.”

So the first question is “what’s stale underwriting?” The second is “what’s the ‘death spiral?” and the third is “what can I do about either or both of these?”

We’ll answer the first two questions in Part 2, and the last one on Part 3.

Thursday, September 22, 2005

of Consumer Centric Health Care. I make the distinction between Consumer Driven vs Consumer Centric because the plans we’ll be looking at encourage an insured to take at least some responsibility for their care. On the other hand, neither one would be HSA-compliant, so we’ll skip the CDHP label (at least for now).

My industry just loves acronyms: CDHP, HSA, HRA, PPO, you name it. Well, let’s add another one to that list: Self Directed Health Plan (SDHP). One of my carriers has just introduced one such, and it’s a pretty neat idea. They start with a high deductible group plan, and while they strip out the doctor’s visit co-pays, they leave intact the prescription drug card, as well as the co-insurance. The high deductible and absence of co-pays helps lower the cost dramatically.

“Well, Henry, what’s the big deal,” you may ask, “after all, we’ve seen low-end plans before.” What makes this one unique is that the carrier is paying the employee to stay healthy: the plan includes a Self Directed Account, funded solely by the insurer. That’s right, the carrier puts in $1,000 a year for each covered employee ($2,000 for families), to pay for routine and preventive care. Services such as annual physicals and immunizations get reimbursed directly by the carrier, but still count toward one’s annual deductible. Pretty cool.

A little bird tells me that one of our eastern seaboard states is working with an insurance company to develop and market a policy that’s also “out there:” all covered employees of companies that sign up for this coverage receive “executive series” medical exams. In fact, so do their covered spouses and children.

Once the employee’s (or family member’s) current health is assessed, they’re enrolled in a treatment plan (if applicable). They receive full policy benefits if they follow “doctors orders,” but receive a significantly lower level of benefits if they don’t. This will be very helpful for those with chronic conditions such as diabetes, Crohn’s, hypertension, etc.

The program is still in the planning stage, but the carrier, exam provider and re-insurer are all in place. So far, details are scarce, but I’ll pass them along as I learn of them.

A few weeks ago we heard the story of Haley Knutsen, the brave 9 year old who suffered from leukemia, and whose parents’ medical plan had come up short. Folks from around the country rallied to raise funds for her treatment, which was to have included a transplant.

Yesterday, we learned the sad news that Haley had lost her 7 year battle with leukemia. We also learned that her parents intend to donate the money that has been raised on Haley’s behalf to another young person who faces a similar challenge.

Which raises the question: are such monies fungible? In other words, is it right that Haley’s parents treat the funds that were raised as solely their own, to do with as they please, rather than return them (if possible) to the folks who actually contributed?

On the one hand, it’s hard to imagine that someone who donated money to little Haley would have a problem with that money going to another little girl (or boy) with leukemia.

On the other hand, when one donates money on behalf of a specific person (or cause) is it wrong if that money is diverted to something (or someone) else? I seem to recall that, after 9/11, some charities took money earmarked for 9/11 victims and spent that money on another worthy cause, which caused some controversy. Isn’t this the same thing?

Monday, September 19, 2005

Elisa over at HealthyConcerns reports that little Haley Knutsen has lost her battle with leukemia. Donations to her transplant fund are being forwarded to another young leukemia patient being treated at the same facility.

Recently, I was asked by Oxford University Press to review their new title “One Nation, Uninsured” by Professor Jill Quadagno of Florida State University. I met Dr Quadagno (virtually) at the OUP blog where she had posted an article which linked here. I left a few comments, which prompted the blog’s editor to contact me, offering a chance to review Dr Q’s new tome.

Dr Q is a proponent of national health care (not necessarily socialized medicine, BTW), while I am a staunch opponent. This seemed like a great opportunity to get inside the mind of someone with whom I vehemently disagree, to see if there is any common ground, and to see what makes such a person “tick.” It’s also a valuable opportunity to test my own thought processes, and my own beliefs.

I’ve decided that the fairest way to do this is to offer first my opinion on the quality of the writing, and then on the quality of the content.

As to the first, I found the book to be a fairly easy read. The chapters flow well into each other, and her style is unusual for a member of academe: she doesn’t talk down to her audience, nor assume that we’re experts in the field. If you’re a proponent of a national health care system, this book will help you understand a bit more about how one might work, and some of the challenges such a plan might face. If you’re a free market advocate, it’s not likely to be that useful for you, other than as for intellectual exercise. Either way, the $28 MSRP seems high; however, it’s available from Walmart for $17.

As to content, well, that’s another story. Dr Q opens with what I consider the weakest form of debate: anecdotal evidence. That is, tearjerker stories (which I do not doubt are true) about how the weakest among us have been let down by the system, who can’t afford or qualify for insurance, folks who had insurance and lost it. Of course, I am not unsympathetic to their plight (who would be?), but anecdotal evidence is never going to win a fact-based debate. I can tell all kinds of success stories about folks who have excellent insurance, who were able to buy it even though they weren’t in Olympic-athlete condition, and folks who were able to save money with insurance.

So what?

All this does is reduce the debate to “my story’s better than yours,” not move it forward.

One of the major problems I have with those who push for government-based health care is that we already have two such systems in place: Medicare and the VA. Both of these are not just comparable to, but are actually the embodiment of, national health care systems. The Medicare model is a bit less restrictive; the VA model is exactly what nationalized health care will look like.

Now, do any of the fine folks who yearn for national health insurance ever point to these two institutions as models of efficiency? Of world-class levels of care? Of course not. But if they are truly interested in a fact-based, as opposed to an emotion-based, debate – that is, a debate on the merits – then they must readily concede that their arguments are indeed without merit.

Believe it or not, there are eight chapters in the book; this introduction has touched only on the first. We’ll look at the others in the coming weeks.

Wednesday, September 14, 2005

As in Consumer Driven Health Care, but this time from a different perspective: prescription medications. Under the typical CDHC model, meds are subject to the high deductible that drives the plan. Once that deductible (which includes meds, office visits, etc) is met, then they’re covered at the higher rate (usually 100%).

But as we all know, prescriptions account for a disproportionate slice of the health care expense pie. So, is there some way to bring those costs more in line, to underscore the savings available in CDHC?

As we’ve discussed before, HSA’s (Health Savings Accounts) are the primary vehicle for CDHC (although certainly not the only one). Under new guidelines, HSA plans can include a deductible waiver for certain preventive meds. In other words, that lipitor you’re taking to lower your cholesterol, or the meningitis vaccine for your son headed off to college, can skip the deductible and go straight to the 100% reimbursement level. Not bad.

Medco’s lowering their price for such drugs, which amplifies the savings already built into the HSA. Much as using a PPO network when choosing a doc, using Medco preventive meds can lower one’s out-of-pocket, as well. These discounts really only affect those with CDHC plans that require some co-insurance after the deductible; obviously, if you’re already at 100% reimbursement, the discounts are irrelevant (at least to you).

This is one more arrow in the CDHC quiver. It’ll be interesting to see what part of our healthcare delivery system steps up next.

“When you’re weary, feeling small,When tears are in your eyes, I will dry them all”

So go the lyrics to Simon and Garfunkel’s 1970 hit. And it’s probably fair to say that all of us have bad days, or weeks, or even months. But we don’t have to “go it alone.”

EAP’s (Employee Assistance Programs) have been around for years. But they’re kind of under the radar for most folks. They’re part of a group of insurance-related products that people tend to take for granted (like hearing tests, or wellness programs). And that’s a shame, because these programs can be a vital part of one’s well-being.

According to CorpCare (an EAP firm in Atlanta), about 1 in 5 of their cases involved marital or family problems [ed: gee, there’s a surprise!]. The most prevalent issue, though, is stress: ComPsych, an EAP based in Chicago, says that 40% of their stress cases cited workload, while another 34% had “people issues.” Once can imagine that there will be a spike in EAP claims based on the recent Katrina experience.

So, why don’t we hear more about EAP’s? Well, part of the reason is that most of the time, when looking at group medical plans, they take a backseat to the more commonly used benefits, such as doctor visits and prescriptions. But that’s changing, too: more companies are using EAP’s to help train their employees in more advanced “people skills:” conflict resolution, job performance reviews, and workplace behavior. With the rise of EPLI (Employee Practices Liability) claims, such as sexual harassment and the like, such issues become even more urgent.

Under a Qualified Transportation Expense Plan (QTEP), employees can save up to 40% on their out-of-pocket expenses on certain transit and parking costs. These expenses, which have to be associated with their commute to work, can be paid with pre-tax dollars. They’re most commonly used in major cities by commuters who take mass transit, but they’re also available to workers who use carpools.

In a recent survey, the Society for Human Resource Management found that 14% of employers offered a QTEP (or other transit subsidy). That’s about 1 out of every 7 companies: not bad for a benefit that’s been so long under the radar.

Now, there are some rules and guidelines for companies that want to go this route [ed: ugh!]. For one thing, QTEP’s can’t be offered under a Section 125 (i.e. “cafeteria”) plan; that’s because they’re enabled under Section 132, which has its own rules:

1) There are monthly dollar limits, any reimbursements that go over these limits become taxable income to the employee

2) There are special rules about how (and when) benefits are calculated

3) It’s not really “use it or lose it,” because unused funds can be rolled over. They can’t, however, be cashed out.

4) Employees can “join up” any time during the year, not just at Open Enrollment

I suspect that the reason we haven’t seen more of these is twofold: first, they’re not as well known (or as aggressively marketed) as their Section 125 “cousins. And second, until recently, there hasn’t been such a hue and cry over gas prices. If they continue to hover in the $3/gallon range, though, don’t be surprised to see more airplay given to QTEP’s.

Wednesday, September 07, 2005

UPDATE:This link goes to a clearinghouse that aggregates companies which match donations. You can use it to see if your employer offers matching.

UPDATE II:The BlogBurst Katrina Fundraiser is now over, having raised well over $1 million. Thanx and kudos go to N Z Bear, et al for the incredible efforts. Please take a moment to check out the new Web Relief Project Directory, which lists current web-based relief projects.

UPDATE III:Thank You!! According to N Z Bear, InsureBlog readers have donated almost $2000 toward the Hurricane Katrina BlogBurst Fundraiser. In fact, we're in the Top 40 of ALL 1,850+ participating blogs. Wow. BTW, you can still contribute here.

Regardless of your political pursuasion, fellow Americans are hurting, and we in the blogoshere can help.

N Z Bear is coordinating a special page to raise money to help those affected by Hurricane Katrina. The special "blogathon" officially began last Thursday (September 1) here.

"There's no America out there except America to respond to it. We've got to do it ourselves."

Tuesday, September 06, 2005

In Part 1, we discussed a recent study that looked at the (hypothesized) relationship between genetic diseases and intelligence. The subjects of the study happened to be a specific population of Jews, who on the one hand display above-average intelligence, but on the other are more prone to a deadly disease. Now, what does this have to do with insurance?

We’ve addressed the general topic of genetic testing in insurance underwriting before. It’s been many years since insurance applications asked one’s race, and I’m reasonably certain that (with the exception of certain fraternal carriers), the question of religion wasn’t even brought up [ed – if any readers know otherwise, please let me know].

The question arises, however, as to whether or not carriers should be testing for such potential time bombs. In other words, is it necessarily a good thing that genetics-based underwriting is prohibited? If insurance is truly about risk management, then doesn’t it make sense that a carrier should have an accurate picture of that risk?

In Great Britain, the government and the insurance industry have been wrestling with this dichotomy for some time. A voluntary moratorium was recently extended; insurers in GB have agreed to abjure from using “predictive genetic test results” until 2011. And here in “the colonies,” a recent HCFO article acknowledges that “(g)enetic testing will undoubtedly have broad effects on health care financing in the insurance context and elsewhere.”

The challenge is going to be one of balance: insurers need accurate and complete information about a given risk, while prospective insureds shouldn’t be penalized for something over which they have no control. As noted in Part 1, certain populations are at increased risk for certain conditions: blacks and sickle cell, Ashkenazim and Tay-Sachs, women and breast cancer, etc. If insurers can’t ask about race and religion, then how do they accurately price a given risk? On the other hand, when we read about how vulnerable information databases may be, how do we trust such information to remain private?

I sympathize with the carriers’ need to know as much as possible about a prospect’s health history, and can even see how genetic information can be useful in correctly pricing a risk. But I think that this is far outweighed by an individual’s right not to be adversely affected by such information over which, after all, one has no control.

There is one area of insurance where such information can, and should, be exploited: according to the HCFO study, “genetic testing is most often used to confirm diagnoses or to predict who is most at risk for a particular disease or condition. Advance knowledge of risk factors could point to preventive services or the need for early detection, and could allow providers to more cost-effectively target services.” The goal should be to balance the “good” (claims management, preventive care) with the “bad” (risk to privacy, unfair discrimination).

Thursday, September 01, 2005

Which would you choose? At first blush, this calls to mind the "straw man argument" we've discussed before, but it may not be.

A recent studyon the relationship between the (legendary?) intelligence of Ashkenazic Jews and their risk of a dreaded genetic disease (Tay-Sachs) has sparked an intense debate.

First, though, it's probably helpful to explain "Ashkenazic Jew." There are two populations of Jews in the world, although they share a mutual heritage and homeland. One, the Ashkenazi, hail primarily from eastern Europe. The other, Sephardi, come from the Mediteranean area. Because Jews prefer to marry other Jews, there is a limited gene pool, which tends to exacerbate genetic problems.

Tay-Sachs is a genetic disorder that almost exclusively afflicts Jews of Ashkenazic descent (similar to sickle cell anemia to those of African descent). This is a bad thing.

Ashkenazic Jews tend to score much higher than the mean on standardized intelligence tests; this is a good thing.

Hence the dilemna.

The problem is that, in some ways, the inadvertent experiment that has led to these results -- that is, the fact that Ashkenazic Jews tend to marry other Ashkenazic Jews, and produce Ashkenazic offspring -- looks a lot like a systematic program of eugenics, such as was undertaken by the Nazi's.

As one can imagine, such an image doesn't sit well with either scientists, or the Ashkenazim themselves. Thus the fierce debate.

When Drs Richard J. Herrnstein and Charles Murray first published their controversial book (The Bell Curve) almost a decade ago, they ran into a buzzsaw of politically correct criticism. Perhaps this explains why this new study is still under the radar: it has the potential to brew up the same kind of reaction.

And yet, the study of this unusual relationship may help further our knowledge of how genetics works, and could conceivably lead to medical breakthroughs.

So, why are we talking about this on an insurance blog? Part 2 is here.